Production equipment order cancellations and push-outs by solar manufacturers during 2012 exceeded US$3 billion by the end of third-quarter 2012, according to NPD Solarbuzz.
This has resulted in a significant reduction in order backlogs for solar equipment suppliers, with third-quarter 2012 representing the fourth consecutive quarter of 30% on-quarter backlog declines. When combined with maintenance-only quantities of new orders seen by PV equipment suppliers, the solar book-to-bill ratio has fallen into negative territory, the first time since the industry began to take off in the mid-2000s.
According to Ray Lian, analyst at NPD Solarbuzz, "Negative book-to-bill ratios are extremely rare within established capital equipment sectors. Even the worst downturns in the semiconductor industry have been characterized by positive book-to-bill ratios. Negative book-to-bill metrics suggest that most legacy solar capacity expansion plans have now been cancelled. This satisfies one of the first requirements for the solar industry to rebound from its overcapacity-driven downturn phase."
Customers of solar equipment suppliers - solar cell and module makers - continue to undergo a painful capacity rationalization process, caused by chronic over-investment dating back to 2010. However, quarterly manufacturing capacity for c-Si cells and modules remains constant at 13GW, with new capacity coming online cancelling out the existing capacity that is being shuttered and idled.
During third-quarter 2012, utilization rates for cell and module capacity had to be reduced considerably in an attempt to restore inventories to more manageable levels. However, solar manufacturers remain highly cautious about short-term capacity and production plans, with growing uncertainty related to the outcomes of several ongoing anti-dumping investigations. Some China-based c-Si manufacturers are considering geographic diversification of their manufacturing capacity.
Solar equipment spending is forecast to decline by more than 66% during 2012, and to remain at pre-2008 levels of US$5 billion during 2013. Equipment spending is not forecast to rebound until at least 2014, with tier-one spending accounting for over 90% of addressable revenues. solar equipment spending over the next 12-18 months will be comprised of process tool upgrades, advanced high-efficiency pilot lines, and potential geographic capacity diversification to address any trade restrictions or local content requirements.
